The Power of Micro-Exits: My Story Building & Selling Robin
Part 2 in a series on micro-exits and how to do them successfully. (#92)
Adam McIsaac is an entrepreneur and startup operator who executed a successful micro-exit. He’s writing a series of deep dives into his experience and best practices for other founders looking to exit their startups.
Follow Adam for more on LinkedIn and X.
I’ve spent nearly my entire career at the crossroads of technology, media and entertainment. I’ve been a founder, a COO and an individual contributor at startups in the UK, US and Canada. I’ve been through 2 acquisitions, 1 merger and countless ups-and-downs where as a leadership team, we thought our days were numbered. I’ve had panic attacks during investor meetings, made hundreds of operational mistakes and have the battle scars to prove it all.
For the purposes of this piece, I am sharing my experience as the founder and CEO of Robin, a startup that was in operation between 2016 and 2020. It was a business that never really achieved what it was supposed to. Even though my team and I brought an idea to life, launched a product to the world and built a small breakeven company with loyal customers, it was never a success to me.
It was a slow growth startup.
It was a fake-it-until-you-make-it startup.
It was an always-in-search-of-true-product-market-fit startup.
That said, in November 2020, I sold Robin.
Despite the business being nearly destroyed by COVID-19 (we had built a corporate entertainment platform, and corporate entertainment does not boom during a pandemic), I dug in, did the work, ran a process and found a willing buyer (2 actually!).
Fundamentally, I believe that most businesses and startups can be sold, if the stakeholders want to. It may take time and effort, but it’s possible. You have to find the right angle, the right players and the right time.
As mentioned in my last post for Focused Chaos, micro-exits can be a great thing for founders, investors and ecosystems (under the right circumstances). I will be sharing interviews and insights from other founders in future posts, but for today - this is my story.
I hope you enjoy it.
My story building Robin:
I’ve been a lifelong fan of live music. I promoted concerts while in my undergrad at McGill University, I became a talent agent representing artists at 22 years old, and joined Songkick in London in 2012, hot off their Series B with Sequoia. I always loved the idea of connecting artists and fans.
That’s why I started working on Robin in the summer of 2016. The original concept was a platform that empowered live music fans to reserve concert tickets in their city, even before concerts were announced. It would also provide unique demand data back to artists and their teams to price tickets better, reward true fans and cut out the middle men. #swiftiesrejoice
I wanted to flip the supply/demand dynamic in live events, and I (thought I) knew how to scale the business given my experience at Songkick and as a talent agent in my early career.
I spent the next few months recruiting co-founders, building an initial team, developing an MVP, and testing with a few artists/customers. We applied to YC and were swiftly rejected, but by the end of the year we were accepted to the inaugural Techstars Music in LA, beginning in early 2017.
First startup achievement unlocked - external validation. 😝
The Techstars/LA experience of interacting with industry heavyweights and the customer/investor/market feedback that followed helped reinforce the belief that we had chosen a brutal non-fragmented market (concert ticketing), and weren’t anywhere close to product-market fit. As a result, we ran tests, conducted further customer interviews and iterated until we found a better opportunity. By the end of 2017 we abandoned our initial thesis, pivoted to focus on our B2B users, and ultimately started down the path to build a corporate entertainment platform.
Second startup achievement unlocked - executing a pivot.
In 2018 we rebuilt our platform, made key team changes and started to get traction with large corporate clients, including Deloitte, Molson Coors and WeWork. We were getting better MoM growth, and better margins on transactions. Things were looking up.
But we quickly learned that there are many ways a pivot can affect your business. Although everyone seemed on board to start, some early investors and team members lost confidence and enthusiasm for the new path. In fact, my CTO and co-founder left the company because he wasn’t interested in what we were building.
Honestly, I think I secretly wanted to leave with him, given how slow the business had been growing and how far we had moved from our initial plan. But I pushed on alongside other core team members.
Now that we had new traction with B2B customers, we needed money to execute our plan. I toiled endlessly over a pitch deck, rehearsed my narrative and set out to raise a few million dollars.
In full transparency—I was never good at raising money. I disliked every moment of pitching to most investors and VCs, feeling like I was seeking their approval. Upon reflection, I had the wrong attitude, lacked enthusiasm for what I was selling, and always felt like, on some level, I was groveling. I met with so many other founders that had been wildly successful in their capital raise, who assured me there was money for our business. I could never follow the advice of ‘just play the game and tell them what they want to hear’.
After a few unsuccessful visits to NYC and SF to try and raise funds, I opted out. I returned to my team at the end of 2018 and let them know we were going to take on some debt, reduce our burn and aim for profitability instead.
Third startup achievement unlocked - financial freedom. Sort of.
But in doing so, I had subconsciously written our fate. We had already been operating with a very small team and a tiny budget. I had sealed our fate by deciding to ‘play the game to not lose’ as opposed to ‘playing the game to win’. We became scared as a company. We were scared to lose any revenue or clients so we focused on retention but not growth. We tested acquisition channels with minimal success because we were too scared to place big bets. We were scared to make the wrong decision and thus lost our energy, our drive and our focus to try and build something big.
We became the prototypical zombie startup. Just walking around the world aimlessly, feeding on whatever growth we could find. As a result, we existed in this slow growth state through all of 2019, while we seemingly witnessed other startups around us thrive or die.
Then, in early 2020 we had our ‘coming to Jesus’ moment. I had been away on my honeymoon and returned to tell my partners that I had fallen out of love with the business and no longer wanted to run it. From a financial perspective, the last few years had been very difficult for me, and I wanted to start a new chapter—whatever that would be.
I decided to get some feedback on my approach from a few other founders whose opinions I trusted. One of them shared his recent experience with a micro-exit and all the benefits it had delivered for his team and for himself.
Thus began my process of selling Robin.
My story selling Robin:
There’s an old adage: “Great businesses are bought, not sold.”
This may be true. I wouldn’t know. I didn’t build a great business. I built a just ok business, and I can assure you just ok businesses are sold, not bought.
In February 2020 I sent the following note to our investors, outlining the possible paths forward and my preference to attempt to sell the business.
➡️ Check out the investor update email I sent.
Founder Tip #1: It’s important to build consensus with your team, investors and advisors. In the end you may require signatures, approvals or concessions (depending on your governance situation), so it’s best to keep everyone updated on your progress and aligned as best you can. That said, don’t be discouraged if you can’t please everyone. You rarely can.
“There’s always one asshole hiding on your cap table. You might not know who it is yet, but they’re there, and will make themselves known when it’s time to sell your company.” - anonymous founder
Despite an underwhelming 2019 from a growth perspective, and all the challenges we had faced, we knew we had built a business with value, especially for the right type of buyer. At a high level, we hypothesized our value to acquirers in three distinct areas:
Our team: We had accrued a wealth of domain expertise that could be applied to various other businesses in our/related categories.
Our customers: We had a nice list of high-value B2B customers that could be valuable to someone selling different products to our buyers.
Our products and services: Assuming an acquirer already served our ideal customers, we could repurpose our offering to be complementary to their own, and reduce acquisition costs.
In the end, it turned out that the perceived value from prospective acquirers was 1) team, followed by 3) products and service. Our ability to build low-cost tools, test ideas and iterate quickly was attractive given the market and players we targeted. They didn’t really care about our customers.
To take you through my process for preparing to sell Robin, I’d like to sheepishly introduce you to The Santa Framework.
The Santa Framework:
Making a list and checking it twice
Finding out who’s naughty or nice
Know if you’ve been bad or good, so be good for goodness sake
Better Not Cry, Better Not Pout
Why the Santa Framework?
First off, because Santa Claus doesn’t exist. He’s a myth. What I mean by this is nobody was coming to magically deliver us an acquisition under the tree. We would have to do the work ourselves. (Ours-elves...elves…get it?) 😜
In February 2020, I did quick research to explore our possible options and paths forward before kicking off the sales process. We were doing less than $1M in revenue / year and were informed by advisors that the potential transaction wasn’t going to be attractive to investment bankers, business brokers or third party sellers. We quickly explored and dismissed the idea of posting our business on marketplaces (Acquire.com, etc.) because they seemed unproven at the time. In retrospect, I wish I had listed the business on a few of these sites. Even if it was simply to get more market feedback and data points to use in our eventual sale negotiations.
We were on our own. I would need to run the sales process myself.
Making a list and checking it twice:
To run an effective sales process I needed to do the strategic planning and research to identify the companies to target, and the high-value individuals at these companies who would be most receptive to my pitch. I also needed a way to establish a strong strategic rationale for an acquisition with each prospective buyer.
➡️ Check out our Acquisition Process list.
Founder tip #2: Take the necessary time to think about the Strategic Rationale for any acquirer to consider your business. This allows you to build 3-5 narratives that you can test in early acquisition conversations. At Robin, we spent many hours talking through possible scenarios, and even did some role playing to try and get in the shoes of prospective buyers.
Finding out who’s naughty or nice:
I ruthlessly prioritized the target companies in our list based on a variety of factors that were deemed important.
Industry: Directly related or adjacent to Robin
Strategic fit: Could we make a clear argument for how we’d help their business?
Speed to move: We wanted this to happen quickly, so mostly focused on startups and SMBs
Acquirer financials: Did they have money for an acquisition, or had they recently raised capital?
Previous acquisitions: Had they done this before? We didn’t have time to educate anyone.
Existing relationship: Did they know us, had we worked together or had we partnered before?
Know if you’ve been bad or good, so be good for goodness sake
I made a decision early on that I was going to be upfront with buyers about our situation, direct about our financial situation, and transparent about our desire to sell quickly. This approach is slightly controversial, as some founders will advise that you disguise your sales process as a partnership discussion to try and incept the acquisition idea. This wouldn’t have worked for us at the time. I believed that I needed to short-circuit the process as best I could to increase my chances for success.
Better not cry, better not pout
This was a tenant and belief that I would explore all acquisition scenarios, no matter how big or small. I also decided that I wouldn’t take offense or let emotion rule the process (like it may have in my previous fundraising experiences). I would do whatever it took. This also meant that I wouldn’t hold too many things sacred. I would share sensitive information early on. I wouldn’t get caught up requiring NDAs unless they wanted one. I wouldn’t get caught up in lengthy valuation negotiations. I would just get something done that was fair.
Running the process:
After planning, thorough research, and building excitement with the team, I was now ready to start my outreach.
I started emailing, calling and DM’ing our list of prospects. No stone was left unturned. I was using a variety of messages that included the following:
“Founder to founder - we’re running out of steam and are looking to join a business that has a far higher ceiling. I think we can do our best work as part of your team.”
“Given that we serve the same customers, I think our product would be an exciting compliment to your own.”
“We’ve built a scalable distribution channel for your product. Can we grab 30 mins this week so I can share how I think we can 2X your sales in 2 years?”
Founder tip #3: Be wary of Corporate Development teams. They are paid to explore buy vs. build scenarios. From my experience, they are lovely humans, who will answer emails and schedule calls to learn more. However, unless they already have an internal mandate that fits, they won’t push an acquisition thesis upwards and are likely wasting your time.
I was immediately surprised by the number of positive responses we received. Of course, many people ignored my messages, but others seemed genuinely interested in learning more.
I was excited and reinvigorated. We signed our first NDA. It felt like something was going to happen. It was early March 2020 and for the first time in months, I was feeling pretty good.
Fast forward a week, the world shut down due to a global pandemic, and nobody was returning my calls. The industries we had targeted were having an especially difficult time.
Corporate Events. Dead. 💀
Corporate Travel. Dead. 💀
Live Entertainment. Dead. 💀
Experience Platforms. Dead. 💀
The majority of our target acquirers were dealing with an existential threat to their core business so couldn’t entertain an acquisition. In fact, OUR business was also turned upside down! Our revenue at Robin went to zero within a few days. We had to process nearly a hundred thousand dollars in refunds. Our ability to service our debt was compromised. We were likely doomed. By April, I had exhausted my target acquirers list and had completely lost hope that we would make it out alive.
I won’t bore you with the details of the next few weeks, but rest assured, I was a wreck. Picture a sad man moping around, taking his dog for a walk with a beer can in his pocket. The reality of our business was now grim.
We owed money to customers, lenders and our team. This coupled with the radio silence on the acquisition outreach was hard to stomach. I allowed myself to wallow in self pity for a few weeks while the world started to normalize around the new reality of the pandemic. Then, I again found encouragement from other founders, and pulled up my proverbial socks to get back to it, despite the full realization that I was now selling a much worse asset.
Luckily, by late June I was able to pick up some conversations that had started earlier that year, and one suitor reached back out to us. They had identified a need for a team like ours to help them build their existing business. They had parted ways with their previous CEO and thought that I could step in to lead the legacy business, and take our knowledge from Robin to accelerate their growth.
In full transparency, I was very suspicious of this company, their leadership, their financial situation and the probability that they’d be able to provide the type of acquisition we desired. But I was desperate, so I forged ahead and encouraged them to put an offer together.
Founder tip #4: Get an offer. Any offer. It doesn’t matter if it’s for stock, cash, crypto or trade. Just get someone to put something on paper! Not only is a formal offer a milestone in your journey and a moment to celebrate, it can help you accelerate conversations with other possible acquirers, and starts a ticking clock.
In late June, I received an email in my inbox from the executives. I had our first formal offer to acquire Robin.
Better yet, I had our first offer, and no exclusivity clause. I had made it clear that we would continue conversations with other potential acquirers that I had in the pipeline and share that we had received our first bid (which we did, but we didn’t share the specifics of the offer).
Did I use the offer in hand to accelerate conversations with other prospective buyers in our pipeline?
Absolutely.
Did I also use the offer as an excuse to contact nearly everyone (again) on my original list?
Very likely.
I stand by my actions. I felt a tremendous duty to my team and investors to try and find the best possible outcome under the circumstances. And I knew this first offer wasn’t the best one out there. If that makes me a bad seller—mea culpa.
Over the next few weeks I kept moving other conversations forward as I tried making progress with the existing offer we had. Thankfully, by applying pressure on all parties by letting them know we had an offer in hand, I was quickly able to weed out some of the prospective buyers that weren’t serious, or unable to make progress. The ones who were serious stepped up their game, and made it obvious that this was in genuine consideration.
For context, I spoke with many different people at the prospective acquirers. Founders, CXOs, product leaders, investors, etc. If I left a call and they had expressed interest in repurposing our product, my team would quickly mock up screenshots of our platform with their logo and colour scheme. If they asked for financial data or projections I would put those together immediately. I wanted to arm any internal advocate with all the material they needed to move a possible acquisition along.
Founder tip #5: Think of your advocate at the acquiring company as the biggest customer you’ve ever had. You need to listen to their needs on how to get the idea sold internally. If they are the CEO, what do they need for their board? If they are a product owner, how do you help accelerate their roadmap? If they are an investor, how can you support the founder’s vision? This is a sales process after all.
At the same time I was still in weekly conversations with the first acquirer. I had made it clear that I wanted them to revise their offer, so I left the ball in their court to manage the back and forth. They seemed to have quite a lot going on so I didn’t mind when follow-ups were weeks apart.
Then, in mid July, nearly a month after our first offer had been received, I had my second offer. This offer was better. This acquirer was based in the US, and had been growing throughout the pandemic. The CEO and I saw the world in a similar way, and could communicate clearly. This offer included an exclusivity clause. I let the original acquirer know that we wouldn’t be moving forward with their offer any further. I suspect this wasn’t a total surprise for them. I thanked them for their time.
Before signing the LOI I did a final round of outreach to try and get any other potential suitors to formalize their intentions. None of them could do it under the timelines I had available. It was now time to sign the LOI and get into formal diligence.
While you might think this was a joyous occasion to exhale, it wasn’t. It was more like the starting pistol of a marathon. What followed was a lengthy process of due diligence, deal term negotiations and back-and-forth between our respective legal teams. From start to finish it took nearly 4 months to get all details confirmed, and there were numerous times that I thought the deal was going to die. Not because of any specific deal term, but more so because a few days without progress felt like a full year of inertia.
Founder tip #6: When going through diligence, try and find 1-2 experienced advisors who can help you navigate the process. There are so many deal terms that feel absolutely crucial that aren’t (ex: representations and warranties), and many that seem inconsequential that are critical long term (ex: liabilities payment schedule, how options roll over, etc). It can be confusing! So get a few voices you trust in your corner, and block out the rest.
On a Friday in late November 2020 we received word that the deal was finalized. We had completed a share sale to Thuzio. Our team would become full time employees on the following Monday. I would no longer be a CEO. The business I had started in the summer of 2016, would essentially shutter.
I experienced a wide range of emotions that Friday evening. While celebrating with some friends I cried alone in the bathroom as an overwhelming feeling of relief swept over me.
Not because I had an incredible sum of money in my bank account (the deal was mostly stock), but because I had found my version of success out of failure. I had weathered the startup storm, and had found an outcome I could be proud of.
The years that followed were very good to me. My wife and I started a family and bought a home. We traveled often. I excelled at work and achieved success, but learned to leave work problems at work. I licked my startup wounds, recovered and became quite proud of my micro-exit. I started advising other founders and sharing my story. I started learning of micro-exit outcomes that were far better than my own. I started seeing patterns for micro-successes.
That’s why I’m compelled to promote the idea of micro-exits and planning your exit early. In my next post on Focused Chaos, I’ll be sharing other founders’ micro-exit stories to give people a sense of what’s possible.
Until next time!
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I mean, what you went through is what makes an entrepreneur an entrepreneur, really inspiring article
Absolutely loved this. Thanks for going deep into the details (and feeling), really appreciate it.